Chinese cellcos to get FDD LTE spectrum this month? May 14 2014

If Unicom and Telecom get FDD licences this month, China Mobile's 4G headstart would be severely reduced

By Caroline Gabriel

China Mobile appeared to have played a blinder when it succeeded in getting the government to assign TD-LTE spectrum to all three Chinese cellcos, before the more common FDD frequencies. But the headstart it secured may be far shorter than it had hoped, with the government reported to be ready to award FD-LTE licences this month.

The awards of TDD licences first gave Mobile, which already had huge TD-LTE trial networks in place, a major lead over its two rivals, which had hoped to build out 4G in paired FDD spectrum, as they did in 3G. Those operators, China Unicom and China Telecom, were faced with the choice of adopting a hybrid TDD/FDD strategy, or falling behind in the 4G race by waiting for FD-LTE licences.

However, if they do secure paired spectrum at an early stage - rather than having to wait anything between six and 18 months, as previously rumored - they will be able to major on their preferred technology and keep TD-LTE as a secondary resource, perhaps for small cells or enterprise networks. Reports from Xinhuanet say that the Ministry of Industry and IT (MIIT) is set to issue FDD licences to Telecom and Unicom on May 17, although initially these will be just for 20 cities.

Both carriers have run trials in both types of spectrum. It is unclear whether China Mobile will also gain FDD frequencies, or will remain TDD-only, as it was, reluctantly, in 3G, where it was saddled with the homegrown TD-SCDMA technology while its competitors were allocated the more mainstream W-CDMA and CDMA2000 platforms.

While Mobile's support is boosting the global device and roaming ecosystem for TD-LTE, the economics of FD-LTE still look better for now. And the business case for 4G should improve further for Unicom and Telecom, if they agree an infrastructure sharing deal, which is currently the topic of preliminary negotiations between all three cellcos. Although such an agreement would reduce capex and opex costs for all the operators, the smaller ones are expected to benefit most, since Mobile would lose some of its first mover advantage in LTE roll-out if the access network - not just passive infrastructure like towers - is included in the deal, an outcome the government supports.

Unicom's preferred 4G strategy is said to be hybrid, leasing TD-LTE infrastructure from Mobile while building its own FD-LTE. It is already investing in dual-mode devices. It is clear that the previously stagnant Chinese mobile market is set for major shake-up. The MIIT is acting far more quickly in allocating 4G spectrum than it did during the painfully protracted 3G process. Network sharing could give Unicom and Telecom a better basis to narrow Mobile's lead, especially in rural areas. The first MVNOs are starting to offer services, with retail giant Alibaba among the 20 or so which will go live this year.

And the MIIT has also just deregulated retail telecoms prices so that the three major carriers can set their own prices without the need for government approval. That will enable them to respond more flexibly to market changes and to compete more aggressively.

Consumers hope it will lead to lower rates, pointing to the huge difference in China Mobile's prices on the mainland and in the more competitive Hong Kong market (about $9 gets a user 1,700 minutes, 10,000 texts and unlimited data in Hong Kong; but only 350 minutes, 10Mbytes of data and no texts in the rest of China).